A winding petition is a last resort for creditors attempting to recoup sums of money owed to them. It is a legal notice obtained from the courts that requires that the debtor’s business be closed down, or ‘wound up’, with money recouped via the sale of assets being used to repay company debt.
Winding up petitions are a serious step for a creditor to undertake, and often come as a result of them feeling that there are no more options available to them to get their money back; perhaps as a result of the debtor failing to adhere to agreements, or not answering correspondence.
The impact of a winding up petition can be more significant than just a hit to the indebted company’s bank account. Once actioned, the petition is advertised in the Gazette, meaning all the firm’s creditors could find out that it is in financial trouble. The same is true for their bank, who will usually freeze their accounts as soon as they get wind of the situation. It may also cause suppliers and customers to stop dealing with the business.
In order for an application for a winding up petition to be considered, the debt must be more than £750, and have been outstanding for over 21 days. Anything less than that will lead to an application being summarily rejected.
If the order is made, the creditor can look to appoint an insolvency practitioner to act on their behalf to retrieve the money owed. In the eyes of the courts, this is not considered as a method of debt recovery. Instead, it is seen as a sign that the company cannot pay its debt, and is the beginning of the process of winding it up.
Should a winding up petition not be dealt with by the debtor in the allotted time, or the money not be paid back in full, it is likely that the winding up petition could be made into a winding up order — a more serious notice that leads to compulsory liquidation shortly after.